The Pacific Trade Deal – Three Questions for Stephen Silvia

May 19, 2015

President Obama is trying to finalize the Trans-Pacific Partnership (TPP), a large trade accord with eleven nations in the Pacific Rim. But the president is facing opposition from his own party. We asked Professor Stephen Silvia, an expert on labor issues, for some insights:

Q: The TPP is the largest trade deal in a generation. What does the pan-Pacific pact seek to accomplish?

The objective of the Trans-Pacific Partnership is to create an economic area spanning both sides of the Pacific that has trade without tariffs and liberalized investment rules. Currently, twelve countries that produce 40 percent of global output are parties to the negotiations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

Q: President Obama is seeking “trade promotion authority” (TPA), otherwise known as “fast track” legislation, to enact the TPP and other trade agreements. Last week, the President faced a setback when Senate Democrats temporarily blocked opening floor debate on the bill. What are the opponents’ concerns?

There are many. The treaty as it stands does not address the issue of currency manipulation, which is when a country depresses the value of its currency in order to sell more products abroad. The White House resisted a provision against currency manipulation, claiming that had that been in place during the financial crisis, foreign governments could have used it against the United States when it resorted to quantitative easing to stimulate the economy. Richard Trumka, president of the AFL-CIO trade union confederation, said that this justification for excluding language against currency manipulation was, “just pure, unadulterated horse-waste.”

Many Democrats also object to the investor-state dispute settlement provision in the draft agreement, which permits investors to bring disputes before an arbitral tribunal for settlement instead of a court. Investor-state dispute settlement (ISDS) arbiters are typically corporate lawyers. Critics claim that corporations have used ISDS tribunals in existing trade agreements to overturn national laws and regulations. Some Democrats are concerned about the open nature of trade promotion authority. They fear that China will be let into the TPP. They want the addition of new parties to the agreement to be subjected to congressional approval. Many Democrats argue that the environment and labor rights provisions in the agreement fall short, even though the Obama administration counters that they are the strongest ever negotiated in any U.S. trade agreement.

Republican skeptics, principally Tea Party Republicans, simply don’t want to give President Obama any additional authority in any area.

Q: What do you think the odds are of the TPP passing?

The Obama administration has an uphill battle on its hands and very few tools to fight it. First, the president has to get fast-track authority (TPA), which will be difficult. Fast track is ultimately likely to clear the Senate because the Republicans and Democrats worked out a deal to allow separate votes on Democratic concerns, namely, currency manipulation, beefed up assistance for workers who lose their jobs owing to trade, and African trade promotion. This compromise, however, is not sufficient to guarantee passage of fast track authority in the House. At this point, Republican House Speaker John Boehner has said that he needs fifty Democrats to vote for the bill because he cannot get enough House Republicans to vote for it.

If the Obama administration succeeds in getting fast track authority from Congress, it then still must submit the actual TPP agreement to both houses of Congress for approval. If the president fails to get TPA, he would have to make a hard choice: continue to pursue the TPP without TPA, or abandon it. Congress did pass free trade agreements with Colombia, Panama, and South Korea without TPA in 2011. The governments of several parties negotiating the TPP have indicated, however, that they would abandon the talks if TPA did not pass.

The AFL-CIO has pulled out all stops in opposition to both TPA and the TPP. It has suspended campaign contributions and redirected money to wage a multimillion dollar campaign. The union confederation has threated to cut off campaign contributions to any member of Congress who supports either bill.

The administration has made passing the TPP a priority, but it may not prevail. In the past, administrations worked with sympathetic congressional leaders to use earmarks to persuade wavering members of Congress to vote their way. Since earmarks have been banned and Congress is still operating under the budget sequester, such “side payments” are no longer available, which makes finding a majority in both houses of Congress for TPA and the TPP considerably harder than it had been for previous administrations.

Silvia is the author of Holding the Shop Together: German Industrial Relations in the Postwar Era. For media requests, please call J. Paul Johnson at 202-885-5943.